Russian furniture market overview · Market evolution and prospects – national currency Source: Euromonitor and Rosstat 2 During the 2008-2013 period, Russian furniture market has

Russian furniture market overview

Market evolution and prospects – national currency

2 Source: Euromonitor and Rosstat

During the 2008-2013 period, Russian furniture market has grown at a 7.2% CAGR, reaching c.RUR984 bn in 2013. According to Euromonitor, the market will slow down between 2014 and 2018, growing by c.4pp below historical figures

In 2013, the Russian furniture market amounted to c.RUR984 bn, showing a significant positive performance during the global economic downturn, with a CAGR of 7.2% since 2008.

Euromonitor forecasts show a slowdown of the growth in the Russian Furniture market for the period 2014-2018 (CAGR 3.1%, c.4pp below the growth achieved in 2008-2013), reflecting the political instability, the devaluation of the Ruble and the stagnation of the economic activity in the country.

Evolution of Russian furniture market – 2008–2018E – RUR bn

FURNITURE MARKET includes: Furniture, Gardening, Home Improvement and Homewares.

695.4 670.9 690.7

805.3

879.2

984.0 995.7

-3.5%

3.0%

16.6%

9.2%

11.9%

1.2%

2008 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

Furniture expenditure per capita - RUR mn % growth

6% 14% 15%

11% 11% 13% 8%

12%

52%

54% 46% 57%

62% 55%

56% 54%

27%

27%

31% 25%

18% 20%

27% 25%

16%

5% 8% 8% 10% 11% 9% 9%

Poland USA France Germany Spain United Kingdom Russia Average

Gardening Home Furnishings Home Improvement Homewares

Furniture market – segments and international benchmark

3 Source: Euromonitor and Beragua

Furniture market segments – 2013 benchmark – % of the Furniture Market

Overall, there are no major differences between the composition of the Russian Furniture Market vs. Top European countries and the US, being Home Furnishing the most important segment accounting for c.56% of the market, followed

by Home Improvement with c.27% of market share

4 Source: Euromonitor, Rosstat and IMF

During the period 2008-2013 the Russian furniture market posted a solid growth, while most top markets in Europe and the US were declining. This substantial differential growth will significantly decrease in the period 2014-2018 due to the

envisaged slow down of the Russian market, but will still be in positive territory

Market evolution benchmark

Russian furniture market evolution benchmark – 2008-2013 – % of growth Total Russian furniture market evolution benchmark

2008-2013 CAGR (*)

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2009 2010 2011 2012 2013

Poland Russia France Germany Spain United Kingdom United States

7.2%

0.5%

-0.6%

-0.9%

-1.5%

-2.2%

-5.9%

Russia

Poland

United States

Germany

France

United Kingdom

Spain

Note(*): Growth rates calculated according to market evolution in national currency.

Russian furniture market evolution benchmark – 2014-2018 - % of growth Total Russian furniture market evolution benchmark

2014-2018 CAGR (*)

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2014 2015 2016 2017 2018

Poland Russia France Germany

3.1%

3.0%

2.4%

0.3%

-0.4%

-0.5%

-0.8%

Russia

United States

Poland

Germany

France

Spain

United Kingdom


Furniture expenditure per capita – regional breakdown

5 Source: Rosstat and Beragua

The average furniture expenditure per capita in Russia amounted to c.USD215 in 2013. While most regions have similar expenditure figures, Moscow City is substantially above the country average (+91%)

Furniture expenditure per capita by regions – 2013 – USD (*)

+91.5%

-39.3%

Note(*): Figures converted into USD using the average exchange rate for 2013: USD1= RUR31.8540.

413

252

223 215 215 215

208 201

190 188

169

131

Moscow Far East Ural Russian

Federation

St. Petersburg Volga South Moscow Oblast North-West Siberia Rest of Central North Caucasus


Furniture market in Russia – breakdown by regions

6 Source: Rosstat and Beragua

There has not been major changes in the Regional distribution of the Russian furniture market in the period 2010-2013. The market is mainly concentrated in 4 regions (Volga, Moscow city, Siberia and Rest of Central), which account for a

combined 60% of the total market

Furniture market breakdown by regions – 2010-2013 evolution

The distribution of the Russian furniture market across its regions has remained fairly unchanged during the 2010-2013 period being both Volga and St. Petersburg the only areas with a relevant variation in their market share over this period (+2 pp and -1 pp compared to 2010, respectively).

Russian market is mainly concentrated in 4 regions which account for c.60% of the total market: Volga (c.21% MS), Moscow city (c.16%), Siberia and Rest of Central (c.12% and c.11% respectively).

c.60% of total market

18.7%

15.3%

12.4% 10.6%

9.8% 8.4%

5.4% 5.7% 4.8% 4.3% 4.5%

20.7%

16.0%

11.8% 10.7%

9.4% 8.8%

5.4% 5.1% 4.6% 4.0% 3.5%

2.0 pp

0.7 pp

-0.6 pp

0.2 pp

-0.5 pp

0.4 pp

-0.1 pp

-0.6 pp

-0.2 pp -0.3 pp

-1.0 pp

Volga Moscow Siberia Rest of Central South Ural North-West Far East Moscow Oblast North Caucasus St. Petersburg

2010 2013 PP of change


Home furnishing market segments

7 Source: Discovery research group, Market Center and Beragua

Upholstery together with Office, Living rooms and Hallways are the most important segments in the Russian Home Furnishing sector, accounting for a combined 67% of the market

Upholstery, Office, Living rooms and Hallways, are the most relevant segments within the Russian Home Furnishing market, accounting for c.67% of total sales.

Office Furniture has been the most dynamic segment, increasing its participation in the market by c.7pp during the 2006-2012 period, followed by Bedroom Furniture (2.5pp of increase) and Upholstery (+c.2pp market share), while Kitchen Furniture has remained stable over the same period. Conversely, Living rooms and Hallways suffered a significant decline of its market share since 2006 (-c.12pp).

23%

15%

32%

14% 16%

25% 22%

20%

17% 16%

1.7 pp

6.9 pp

-11.6 pp

2.5 pp

0.4 pp

Upholstery Office Furniture Furniture for Living rooms and Hallways Bedroom furniture Kitchen furniture

2006 2012 PP of change

Russian furniture market segments – 2006-2012 evolution – % of MS

3.0%

6.0%

Furniture consumtion per

capita

GDP per capita

7.1%

10.2%

Furniture consumtion per

capita

GDP per capita


Between 2008 and 2013, Russian furniture expenditure per capita has been progressing at a 7.1% CAGR, c.3pp below the GDP per capita growth during the same period. This gap should remain virtually unchanged during 2014-2018, when

the furniture market is forecasted to grow by 3% compared to a GDP progression of 6% in nominal terms

Russian Furniture consumption per capita vs. GDP per capita evolution – 2008-2018E (nominal RUR)

Furniture vs. GDP per capita – 2008-2013 CAGR

Furniture vs. GDP per capita – 2014-2018E CAGR

-3.1pp

GDP per capita – a main driver for the furniture sector

-3.pp

-3.5%

2.9%

16.6%

9.0%

11.7%

1.0%

3.0% 3.4% 3.7% 3.9%

-5.9%

19.2%

20.2%

11.0%

8.9%

7.1%

5.1% 5.0%

6.2% 6.7%

2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

Furniture consumtion per capita - % growth GDP per capita - % growth


Real estate and population pyramid – international benchmark

9 Source: National Institutes of Statistics, IMF, EBRD and Beragua

Along with the economic growth, the evolution of the real estate market and the population pyramid are key drivers of the furniture market and both are favorable in Russia. Additionally, the average housing stock is old and with strong

needs for renovation in the short and mid-term

New houses per 1,000 inhabitants – CAGR 2006-2012 – Benchmark

4.6% 2.6%

-1.2%

-6.2% -6.9%

-15.3%

-39.6%

Poland Russia Germany France United

Kingdom

United

States

Spain

0.5%

7.2%

-0.9% -1.5% -2.2%

-0.6%

-5.9%

Poland Russia Germany France United

Kingdom

United

States

Spain

Furniture market CAGR 2008-2013 – Benchmark

Percentage of population in the range of 20-39 years – 2013 benchmark

31.1% 30.6% 27.0% 26.3% 26.0% 24.3% 23.6%

Average 26.3%

Russia Poland United States Spain United Kingdom France Germany

The real estate market in Russia has performed strongly in spite of the global economic downturn: the number of newly-built houses per 1,000 inhabitants increased by 2.6% CAGR in 2006-2012, while most of European countries and the USA were facing strong declines.

Russia has a significant share of its population within the range of 20 to 39 years: this is the age when people normally get married, have children or leave their parent’s home, implying a strong one-shot furniture expenditure.

Additionally, according to EBRD at least c.10% of the Russian houses need major capital repairs and renovation (the average age of Russian apartments is c.45 years, most of them were constructed in the period 1946-1970). This is another important element to support the furniture market in the future.

(*)

Note(*): Data for France is referred to the period 2006-2011.

874

867

573

568

329

215

133

Germany

United

States

United

Kingdom

France

Spain

Russia

Poland

Furniture consumption as percentage of the GDP


Despite the Russian furniture expenditure per capita is still significantly lower than most Western European countries and the US, its participation in the GPD is in line with the average

Furniture expenditure as % of the GDP – 2013 benchmark Furniture expenditure per capita – 2013

benchmark – USD

c.4x

Note(*): Figures converted into USD using the average exchange rate for 2013: USD1= EUR0.75324.

1.9%

1.6%

1.5% 1.4%

1.3%

1.1%

1.0%

Average

1.4%

Germany United States Russia United Kingdom France Spain Poland


Chains vs. independent retailers – international benchmark

11 Source: Euromonitor, Rosstat and Beragua

Despite the market share controlled by chain retailers in Russia has progressed by 9pp in 2008-2013, independents still have a considerably higher presence in the market than in the US and in most of its European peers, implying room for

further consolidation

Chains vs. independents retailers – 2013 benchmark – % of MS

-9pp

MS evolution of chain retailers

Chain market figures are referred to Furniture stores only.

80% 76% 74% 73% 72%

62% 57%

53%

20% 24% 26% 27% 28%

38% 43%

47%

United States United Kingdom France Germany Poland Russia 2013 Spain Russia 2008

Chain retailers Independent retailers

81% 80%

55%

44% 44%

37%

27%

19%

France Poland Germany Spain United Kingdom Russia 2013 United States Russia 2008

Top 5 concentration – international benchmark


Top 5 concentration – 2013 benchmark – % of MS

+18pp

Furniture market in Russia is still significantly

fragmented although the concentration has

significantly increased since 2008

Russian Furniture market is still considerably fragmented: top 5 furniture players account for c.37% of the chain market sales, a lower concentration level than most of its European peers.

Since 2008 the concentration in Russia has increased by +18pp, underpinned by the strong growth of the market leader IKEA and domestic players such as Yuterra and HOFF.

Furniture market is intrinsically more fragmented than other retail markets such as food, since only France (81%) and Poland (80%), show levels of concentration in line with food retail, where Top 5 players usually control 70-80% of the organized market.

Concentration figures have been calculated over Chain Market.

50% 47%

21%

16%

3% 3%

Germany France United States United Kingdom Spain Russia Poland

Market share of multibrand stores – international benchmark


The combined market share of the multibrand furniture retailers in Russia accounted for c.3% of the Chain market (not including DIY, Hypermarkets and internet), being at a similar level than Spain and above Poland, but substantially below

the rest of the countries included in our benchmark

Share of multibrand stores – 2013 benchmark – % of MS of Furniture Chains

Russian organized furniture market is dominated by IKEA and the specialists: multibrand furniture retailers have still a very limited presence as they represent only 3% of the sector, being at a similar level than Spain but accounting for a substantially lower share than in most of its European peers and the United States.

Germany and France are the countries with the highest presence of multibrand stores amongst the countries analysed in our benchmark, with c.50% and 47% respectively.

Share of Multibrand stores figures are referred to the Furniture Chain Market (not including DIY, Hypermarkets and internet)

Furniture stores density – international benchmark

14 Source: Euromonitor, INE and Beragua

The density of furniture stores in Russia (11 shops per 100,000 inhabitants) is the lowest of our benchmark, being only close to Poland (13) but at significant distance from the rest of Top European countries analyzed and the US. When adjusting by the

furniture expenditure per capita, the distance between Russia and its peers narrows considerably, but it still lags behind, France, Spain and Poland

Number of furniture stores per 100,000 inhabitants – 2013 benchmark Number of furniture stores per 100,000 inhabitants – Furniture per

capita adjusted – 2013 benchmark

83

31 30

18 17 13 11

Average 32

Spain France United Kingdom Germany United States Poland Russia

Fu

rn

itu

re p

er c

ap

ita a

dju

ste

d

55

21

12 11 11

4 4

Average 21

Spain Poland France United Kingdom Russia Germany United States

15

Modern

Pric

e +

Classic

Pric

e -

Positioning of furniture retailers in Russia

Generalist Generalist (ex-Bathroom) Specialists

There is a significant presence of domestic players in Russia, covering a wide range of styles and price points, from classic and expensive products (Shatura, Mebel Chernozemya or Lazurit) to more modern and cheaper ones (Stolplit and Angstrem).

Hoff is the only player (along with IKEA) covering all furniture categories and accessories, being positioned in a mid-price range and including different furniture styles ranging from modern/functional to classic.

16

Assortment coverage of Top furniture retailers

IKEA

ANGSTREM

SHATURA

STOLPIT

MEBEL CHERNOZEMYA

LAZURIT

Bedroom Livingroom Upholstery Kitchen Bathroom Accessories

Top Russian domestic players are

manufacturers specialized in some furniture categories

Commercial attributes – Top Russian players

17

NON-ORGANIZED

STORES

FURNITURE

SHOPPING MALLS

ATTRACTIVENESS OF

STORE

WIDE ASSORTMENT

VARIETY OF STYLES

BRANDS

CUSTOMIZATION

ACCESSORIES

ONLINE

PRICING

DIY BRANDED

STORES IKEA

ONE-STOP SHOPPING

48%

38%

17%

15%

6%

5%

1%

23%

32%

43%

11%

23%

2%

2%

2%

34%

51%

44%

19%

19%

12%

12%

2%

5%

58%

28%

21%

6%

4%

2%

28%

Assortment

Price

Quality of goods

Decoration, in-store

navigation,comfort

Service

Good location

Other

Difficult to answer

Total IKEA Hoff Other store

1%

3%

4%

4%

11%

18%

18%

37%

69%

1%

4%

18%

23%

16%

65%

59%

2%

2%

2%

3%

5%

15%

14%

15%

88%

10%

10%

14%

17%

27%

37%

64%

1%

0%

11%

7%

14%

16%

21%

41%

53%

Store reputation

In-store ambient

Other

Good location

Service


navigation,comfort

Quality of goods

Price

Assortment

Total IKEA Grand Hoff Other store

Best furniture and kitchen store – Reasons

18 Source: Magram market research, May 2014

Main reason to choose the best furniture store – Moscow – % of customers

Total Other

Main reason to choose the best furniture store – Voronezh – % of customers

65%

36%

36%

27%

9%

8%

5%

3%

79%

36%

26%

36%

13%

14%

10%

4%

93%

63%

10%

17%

7%

3%

29%

7%

68%

39%

11%

58%

37%

40%

25%

7%

6%

2%

3%

Assortment

Price

Quality of goods


navigation,comfort

Good location

Store reputation

Service

Other

Total Hoff Tvoy Dom Angstrem Other store

Total Other

Main reason to choose the best furniture store – Krasnodar – % of customers

Total Other

The best home accessories store – Reasons

19 Source: Magram market research, May 2014

Main reason to choose the best home accessories store – Moscow – % of customers

7%

8%

9%

13%

21%

40%

78%

11%

18%

20%

18%

35%

26%

68%

2%

1%

2%

9%

14%

62%

87%

25%

4%

4%

89%

5%

5%

5%

75%

65%

7%

2%

2%

7%

11%

34%

84%

Good location

Service

In-store ambient

Quality of the items


navigation,comfort

Price

Assortment

Total Hoff IKEA Tvoy Dom Leroy Merlin Other store

Total Other

Main reason to choose the best home accessories store – Voronezh – % of customers

Main reason to choose the best home accessories store – Krasnodar – % of customers

87%

40%

15%

10%

7%

6%

2%

85%

49%

4%

5%

5%

1%

1%

99%

21%

22%

10%

7%

6%

84%

51%

16%

9%

2%

12%

5%

88%

18%

15%

21%

9%

0%

3%

70%

64%

24%

6%

12%

12%

0%

Assortment

Price


navigation,comfort

Good location

Quality of goods

Store reputation

Service

Total Yuterra Hoff Auchan TC Tvoy Dom Other store

Total Other

73%

41%

14%

13%

7%

7%

4%

2%

2%

1%

70%

55%

9%

20%

11%

3%

5%

2%

5%

82%

21%

16%

14%

7%

9%

4%

4%

2%

66%

48%

18%

2%

2%

9%

2%

2%

Assortment

Price

Quality of goods


navigation,comfort

In-store ambient

Good location

Difficult to answer

Service

Store reputation

Other

Total IKEA Hoff Other store

Total Other

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28016 Madrid

Telephone: +34 91 535 75 18

Fax: +34 91 536 28 95

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www.beragua.com

Russian furniture market overview · Market evolution and prospects – national currency Source: Euromonitor and Rosstat 2 During the 2008-2013 period, Russian furniture market has

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